UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 0-14961B
LUXTEC CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2741310
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
326 Clark Street, Worcester, Massachusetts 01606
(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including area code)
(508) 856-9454
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding for each of the issuer's classes of
Common Stock, as of the latest practicable date.
The number of shares outstanding of registrant's common stock, par value $.01
per share, at June 4, 1997, was 2,849,657.
<PAGE>
LUXTEC CORPORATION
TABLE OF CONTENTS
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
April 30, 1997 and October 31, 1996 3
Consolidated Condensed Statements of Operations -
Six months ended April 30, 1997 and April 30, 1996 4
Consolidated Condensed Statements of Cash Flows -
Six months ended April 30, 1997 and April 30, 1996 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation 8
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
LUXTEC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, October 31,
1997 1996
Unaudited
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 23,425 $ 172,356
Accounts receivable 1,801,259 1,741,669
Inventories 2,616,025 2,173,015
Prepaid expenses 175,501 210,564
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,616,210 4,297,604
- ---------------------------------------------------------------------------------------------------
PROPERTY & EQUIPMENT AT COST 2,436,695 2,365,740
ACCUMULATED DEPRECIATION (1,759,732) (1,617,861)
- ---------------------------------------------------------------------------------------------------
PROPERTY & EQUIPMENT - NET 676,962 747,879
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS 263,604 249,375
- ---------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 5,556,776 $ 5,294,858
===================================================================================================
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ 1,823,456 $ 2,146,223
Current portion of equipment facility loan 49,000 39,612
Accounts payable 1,015,684 726,201
Accrued expenses 392,837 451,068
- ---------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,280,977 3,363,104
$ $
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Note Payable to Stockholder $ 0 $ 1,000,000
Equipment Loan, Net of Current Portion 179,593 118,843
Term Loan 500,000 -
- ---------------------------------------------------------------------------------------------------
TOTAL LONG TERM LIABILITIES $ 679,593 $ 1,118,843
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
SERIES A, PREFERRED STOCK, $1.00 PAR VALUE,
Authorized 500,000 shares
Issued and outstanding - 0 shares in
1996 and 10,000 shares in 1997 $ 1,081,136 $ -
- ---------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value -
Authorized - 10,000,000 shares
Issued and outstanding 2,841,539 shares in
1996 and 2,849,657 shares in 1997 28,497 28,415
Additional paid-in capital 8,337,069 8,323,216
Accumulated deficit (7,850,496) (7,538,720)
- ---------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 515,070 812,911
- ---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 5,556,776 $ 5,294,858
===================================================================================================
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
LUXTEC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
April 30 April 30 April 30 April 30
1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 2,363,673 $ 2,232,412 $ 4,881,037 $ 4,221,315
COST OF SALES 1,417,275 1,180,267 2,839,623 2,253,767
- ------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 946,398 1,052,145 2,041,414 1,967,548
- ------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Selling 629,971 551,136 1,245,713 961,859
Research and development 123,323 138,855 231,452 209,624
General and administrative 378,105 395,214 751,210 776,679
- ------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1,131,399 1,085,205 2,228,375 1,948,162
- ------------------------------------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (185,001) (33,060) (186,961) 19,386
OTHER EXPENSES, NET (44,349) (58,134) (86,780) (91,433)
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
NET LOSS $ (229,350) $ (91,194) $ (273,741) $ (72,047)
==================================================================================================================
NET LOSS PER COMMON SHARE $ (0.08) $ (0.04) $ (0.10) $ (0.03)
==================================================================================================================
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING
2,847,980 2,441,951 2,849,657 2,441,844
===================================================================================================================
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
LUXTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
SIX MONTHS ENDED
April 30, April 30,
1997 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET LOSS $ (273,741) $ (72,047)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED BY OPERATING ACTIVITIES:
Depreciation and amortization 153,862 123,666
Provision for uncollectible accounts receivable 6,000 0
Changes in current assets and liabilities:
Accounts receivable (65,590) 16,973
Inventories (443,010) (504,786)
Prepaid expenses and other current assets 35,063 (50,666)
Accounts payable 289,483 (293,376)
Accrued expenses (100,231) (364,513)
- --------------------------------------------------------------------------------------------------------------
NET CASH USED FOR OPERATING ACTIVITIES (124,423) (1,072,702)
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (70,955) (79,120)
Change in other assets (26,220) 1,928
- --------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (97,175) (77,192)
- --------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on revolving line of credit (322,767) 169,045
Net borrowings on long term debt 570,138 26,818
Net borrowings on subordinated debt (1,000,000) 1,000,000
Proceeds from conversion to preferred stock 1,000,000 -
Preferred stock dividend 81,136 -
Employee stock purchase plan 17,901 14,456
Proceeds from exercise of stock options - 2,445
- --------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 346,408 1,212,764
- --------------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (148,931) (9,177)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 172,356 11,721
- --------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 23,425 $ 2,544
==============================================================================================================
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE>
LUXTEC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Unaudited
1) Basis of Presentation of Consolidated Financial Statements
The accompanying consolidated condensed financial statements have been
prepared in conformity with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments necessary
for a fair presentation have been made which comprise only normal recurring
adjustments. Operating results for the six months ended April 31, 1997, are not
necessarily indicative of the results that may be expected for the entire year.
2) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first in, first out (FIFO) method and includes materials, labor and
manufacturing overhead. Inventories are as follows:
April 30, 1997 October 31, 1996
----------------------------------------------------------------------
Raw material $ 1,774,088 $ 1,237,123
Work in process 158,820 220,255
Finished goods 683,117 715,637
----------------------------------------------------------------------
Total $ 2,616,025 $ 2,173,015
----------------------------------------------------------------------
3) Credit Facilities
The Company has a $2,500,000 revolving line of credit agreement with a
bank. Borrowings bear interest at the bank's prime rate (8.75% at April 30,
1997) plus .25%. Unused portions of the revolving line of credit accrue a fee at
an annual rate of .25%. Borrowings are secured by substantially all assets of
the Company. The agreement contains covenants, including the maintenance of
certain financial ratios, as defined. During the second quarter of fiscal 1997,
the expiration date of the agreement was changed to March 31, 1999.
The Company has a $750,000 equipment facility agreement with a bank.
Borrowings are based on the purchase price of new equipment and conditions
determined by the bank. Borrowings bear interest at the bank's base rate plus
.5%. Borrowings under this facility are secured by substantially all assets of
the Company. The equipment facility agreement allows the Company to draw funds
for the purchase of fixed assets until October 23, 1997.
On April 3, 1997, the Company received $500,000 from a new term loan
agreement with a bank. Borrowings bear interest at the bank's prime rate plus
1.00%. Borrowings are secured by substantially all assets of the Company.
Principal repayment is to be repaid from "Excess Cash Flow," as defined, but no
later than April 3, 2002. The agreement contains covenants, including the
maintenance of certain financial ratios, as defined. As an inducement to grant
the loan under the stated terms, the Company issued a warrant that entitles the
holder to purchase 44,000 shares of common stock at an exercise price of $3.00
per share (approximate fair market value at the date of grant), adjusted for
certain dilutive events, as defined.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4) Note Payable and Preferred Stock
On December 18, 1995, the Company issued Senior Subordinated Notes (the
Notes) to an investor for $1,000,000 in cash. Interest accrued on the Notes at
the rate of 8% per annum and was payable annually in arrears. Principal on the
Notes was due January 1, 2001. In connection with the financing, the Company
issued a detachable stock warrant to the investor. The warrant entitles the
holder to purchase 450,000 shares of common stock at an exercise price of $3.00
per share (fair market value at the date of grant), adjusted for certain
dilutive events, as defined.
On November 14, 1996, the Company exchanged the Senior Subordinated Notes for
ten thousand (10,000) shares of the Company's nonvoting Series A preferred
stock, $1.00 par value per share (the Series A Preferred Stock). The Series A
Preferred Stock has the following rights and preferences:
Dividends
The holders of the Series A Preferred Stock shall be entitled to receive cash
dividends of $8.00 per share per annum, payable when, as and if declared by the
Board of Directors of the Company. Such dividends on the Series A Preferred
Stock shall accrue and be cumulative from the date of issuance.
Liquidation Preference
Upon any liquidation, dissolution or winding up of the Company, after payment or
provision for payment of all debts and other obligations and liabilities of the
Company, the holders of the shares of preferred stock shall be entitled, before
any distribution or payment is made upon any common stock, to be paid an amount
equal to the redemption price ($100 per share) plus an amount equal to all
accrued dividends, and the holders of the preferred stock shall not be entitled
to any further payment.
Redemption
The Company may, at the option of the Company's Board of Directors, redeem part
or all of the outstanding shares of the Series A Preferred Stock at any time or
times at a redemption price of $100 per share.
On January 1, 2001, the Company shall redeem all outstanding shares of the
Series A Preferred Stock at a redemption price of $100 per share.
<PAGE>
LUXTEC CORPORATION
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth below. The industry in which the Company competes is characterized by
rapid changes in technology and frequent new product introductions. The Company
believes that its long-term growth depends largely on its ability to continue to
enhance existing products and to introduce new products and features that meet
the continually changing requirements of customers. While the Company has
invested heavily in new products and processes, there can be no assurance that
it can continue to introduce new products and features on a timely basis or that
certain of its products and processes will not be rendered noncompetitive or
obsolete by its competitors.
RESULTS OF OPERATIONS
Net revenues for the three months ended April 30, 1997 were $2,363,673 or
5.9% greater than the $2,232,412 reported for the same period in fiscal 1996.
For the six months ended April 30, 1997 net revenues increased 15.6% to
$4,881,037 from $4,221,315 reported for the same period last year. The year to
date sales increase of 15.6% was primarily the result of higher sales in Luxtec
surgical lighting products although there was a decrease in royalties received.
Also, development of the microlaparascopy business by the Company's Fiber
Imaging Technologies subsidiary was slowed as a result of the acquisition of one
of its principal customers. The effect of this event is expected to be
temporary, as the acquiring company decided to resubmit to the FDA to extend
applications covered under their 510K.
Cost of sales for the three months ended April 30, 1997 were $1,417,275 or
60.0% of net revenues, compared with $1,180,267 or 52.9% for the same period in
fiscal 1996. For the six month period ended April 30, 1997, cost of sales was
$2,839,623 or 58.2% of net revenues compared with $2,253,767 or 53.4% for the
same period in fiscal 1996. The increase in cost of sales as a percentage of net
revenues was primarily a result of the lowered royalty payments received during
the first two quarters and the absorption of fixed costs related to the slowdown
in the microlaparascopy subsidiary.
Gross profit was $946,398 or 40.0% of net revenues for the quarter ended
April 30, 1997 compared to $1,052,145 or 47.1% for the same period in fiscal
1996. For the six month period ended April 30, 1997 gross profit was $2,041,414
or 41.8% compared with $1,967,548 or 46.6% for the same period in fiscal 1996.
The reduced margin percentage was almost entirely due to the reduction in
royalty payments from the high levels of fiscal 1996.
Selling and marketing expenses were $629,971 for the three months ended
April 30, 1997 compared to $551,136 for the same period in fiscal 1996, an
increase of 14%. For the six month period ended April 30, 1997 selling and
marketing expenses were $1,245,713 compared with $961,859 for the same period in
fiscal 1996, an increase of 30%. Marketing activities related to the
introduction of the CardioDyne motion tolerant blood pressure monitor were
intensified during the first half of fiscal 1997. The Company has noted a
positive reception to date by potential customers. Clinical studies and numerous
demonstrations have been conducted to date, with substantially positive results.
The Company expects to generate revenues from sales of the NBP2000 model by the
end of fiscal 1997. The level of selling and marketing activities associated
with the CardioDyne product introduction are expected to continue to increase
throughout fiscal 1997.
<PAGE>
LUXTEC CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 2. (Continued)
Research and development expenditures were $123,323 for the three months
ended April 30, 1997 compared to $138,855 for the same period in fiscal 1996, a
decrease of 11%. For the six month period ended April 30, 1997 research and
development expenditures were $231,452 compared with $209,624 for the same
period in fiscal 1996, an increase of 10%. The increase for the first half of
fiscal 1997 has resulted from the introduction of a new Xenon light source and
intensification of the development of further CardioDyne products. The Company
believes that the introduction of the fiscal 1997 new product plan and the
efforts related to the CardioDyne product lines may result in an increased rate
of spending for research and development during the remainder of fiscal 1997.
General and administrative expenses were $378,105 for the three months
ended April 30, 1997, compared to $395,214 for the same period in fiscal 1996,
representing a decrease of 4%. For the six months ended April 30, 1997 general
and administrative expenses totaled $751,210 compared to $776,679 during the
same period in fiscal 1996, a decrease of 3%. The decrease is primarily a result
of the completion of the absorption of fiscal 1996 costs attributable to the
integration of the operations of CardioDyne into the Company.
Interest and other expenses of $44,349 for the three months ended April
30, 1997 compared to $58,134 for the same period in fiscal 1996, a decrease of
24%. For the six months ended April 30, 1997 interest and other expenses were
$86,780 compared to $91,433 for the same period in fiscal 1996, a decrease of
5%. The second quarter and first half decreases were the result of the
conversion of Senior Subordinated Notes to preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1997 the Company had working capital of $1,335,233 compared
to working capital of $934,500 at October 31, 1996. The major reason for the
increase in working capital was the completion of a term loan of $500,000 which
allowed for the paydown of the revolving line of credit agreement with the bank
during the second quarter of fiscal 1997.
Cash used by operating activities was primarily funded by the revolving
credit line and the additional long term loan received during the second
quarter. At April 30, 1997 the Company had used $228,593 from a $750,000
equipment facility agreement with a bank, used $1,823,456 from a $2,500,000
revolving credit line, and had borrowed $500,000 under the term loan agreement.
The Corporation anticipates that its current cash requirements will be
satisfied by cash flow from existing operations and the continuation of its
revolving credit arrangement with a bank, although the Company is considering an
additional private placement of equity in the near future.
<PAGE>
LUXTEC CORPORATION
PART II. OTHER INFORMATION
ITEM 1. Legal proceedings
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security holders whether
through solicitation of proxies or otherwise, during the second quarter of the
Corporation's fiscal year ended October 31, 1997.
(a) Annual Meeting of Stockholders was held on April 17, 1997.
(b) Two Class I directors of the Corporation were elected:
FOR WITHHELD
Patrick G. Phillipps 1,574,373 17,634
Louis C. Wallace 1,574,373 17,634
The Board of Directors is composed of Mr. Phillipps and Mr.
Wallace as well as Mr. James W. Hobbs, Mr. James Berardo, Mr.
Paul Epstein, Mr. James J. Goodman and Dr. Thomas VanderSalm.
(c) Other matters voted upon at the meeting:
A proposal to ratify the amendment of the Company's 1992 Stock Option Plan
to increase the number of shares authorized for issuance under the Plan from
300,000 to 400,000 shares.
FOR AGAINST ABSTAIN NO-VOTE
1,264,031 184,036 143,940 0
A proposal to ratify the appointment of Arthur Andersen LLP as independent
public accountants of the Company.
FOR AGAINST ABSTAIN NO-VOTE
1,587,333 2,280 2,394 0
ITEM 5. Other Information
When used in this Form 10-Q and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer, the words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties, including those discussed under the caption "Risk
Factors and Cautionary Statements" below, that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that the factors listed below could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
<PAGE>
LUXTEC CORPORATION
PART II. OTHER INFORMATION
ITEM 5. (Continued)
The Company will NOT undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
Risk Factors and Cautionary Statements
The Company's revenues and income are derived primarily from the
sale of medical devices. The medical device industry is highly competitive. Such
competition could negatively impact the Company's market share and therefore
reduce the Company's revenues and income.
Another result of competition could be the reduction of average unit
prices paid for the Company's products. This could have the impact of reducing
the percentage of profit margin available to the Company for its product sales.
The Company's future operating results are dependent on its ability
to develop, produce and market new and innovative products and services. There
are numerous risks inherent in this complex process, including rapid
technological change and the requirement that the Company bring to market in a
timely fashion new products and services that meet customers' needs.
Historically, the Company's operating results have varied from
fiscal period to fiscal period; accordingly, the Company's financial results in
any particular fiscal period are not necessarily indicative of results for
future periods.
The Company offers a broad variety of products and services to
customers around the world. Changes in the mix of products and services
comprising revenues could cause actual operating results to vary from those
expected.
The Company's success is partly dependent on its ability to
successfully predict and adjust production capacity to meet demand, which is
partly dependent upon the ability of external suppliers to deliver components at
reasonable prices and in a timely manner; capacity or supply constraints, as
well as purchase commitments, could adversely affect future operating results.
The Company operates in a highly competitive environment and in a
highly competitive industry, which includes significant competitive pricing
pressures and intense competition for skilled employees.
The Company offers its products and services directly and through
indirect distribution channels. Changes in the financial condition of, or the
Company's relationship with, distributors and other indirect channel partners,
could cause actual operating results to vary from those expected.
The Company does business worldwide in over 50 countries. Global
and/or regional economic factors and potential changes in laws and regulations
affecting the Company's business, including without limitation, currency
exchange rate fluctuations, changes in monetary policy and tariffs, and federal,
state and international laws regulating the environment, could impact the
Company's financial condition or future results of operations.
<PAGE>
LUXTEC CORPORATIOM
PART II. OTHER INFORMATION
ITEM 5. (Continued)
The market price of the Company's securities could be subject to
fluctuations in response to quarter to quarter variations in operating results,
market conditions in the medical device industry, as well as general economic
conditions and other factors external to the Company.
<PAGE>
LUXTEC CORPORATION
PART II. OTHER INFORMATION
ITEM 6. Exhibits and reports on Form 8-K
(a) Exhibits
No Exhibits were required to be filed.
(b) Reports on Form 8-K
No reports on Form 8-K were required to be filed during the
quarter ended April 30, 1997.
<PAGE>
LUXTEC CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUXTEC CORPORATION
(Registrant)
----------------- --------------------------
Date Samuel M. Stein
Chief Financial Officer
(Principal Accounting Officer
and Duly Authorized Executive
Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 1,875
<ALLOWANCES> 74
<INVENTORY> 2,616
<CURRENT-ASSETS> 4,616
<PP&E> 2,437
<DEPRECIATION> 1,760
<TOTAL-ASSETS> 5,557
<CURRENT-LIABILITIES> 3,232
<BONDS> 0
0
1,081
<COMMON> 28
<OTHER-SE> 760
<TOTAL-LIABILITY-AND-EQUITY> 5,557
<SALES> 4,881
<TOTAL-REVENUES> 4,881
<CGS> 2,840
<TOTAL-COSTS> 2,228
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87
<INCOME-PRETAX> (273)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (273)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
